Boston Scientific and the Road to Ruin

By Catherine Elton | Boston Magazine |

Former executives describe what ensued as an all-out testosterone fest. They claim that Boston Scientific’s top brass became so obsessed with beating J&J that they failed to heed warnings that Guidant was a toxic asset. In the end, Boston Scientific spent $27 billion on a deeply troubled firm facing a mountain of messy litigation for alleged corruption and malfeasance.

In June 2006, less than two months after Boston Scientific closed the deal, it had to recall more of Guidant’s faulty defibrillators. The following April brought yet another recall. Boston Scientific had to shell out $296 million to the federal government after Guidant pleaded guilty to criminal charges related to its sale of defibrillators with deadly defects. The company has paid the feds $22 million more to settle charges that Guidant sales representatives gave kickbacks to doctors who bought defibrillators from the company. Boston Scientific has also spent $234 million to date to settle more than 8,000 claims from patients with Guidant devices. Two class actions and 37 more individual lawsuits await adjudication or settlement. In January of this year, the Department of Justice filed a civil lawsuit against Boston Scientific related to the problems with Guidant.

RANDEL RICHNER, the former vice president of global government affairs at Boston Scientific, says the company’s problems through the years have only been exacerbated by a “Wild West attitude” toward the regulatory agencies. “It was hard to convince the upper management that there needed to be a more proactive way to deal with the government,” Richner says. “We had the image of pushing the envelope, of snubbing our nose at authority. We were like a rebellious teenager. That attitude made us successful, but we needed to make a cultural shift when it came to working with agencies that were critical to our success.”

The FDA did not take kindly to this rebellious teenager. In early 2006, it issued a warning letter informing Boston Scientific that until the company addressed its quality-control concerns, the agency would not entertain new submissions for some of Boston’s products.

Jim Tobin, the man who’d succeeded Nicholas as CEO, spent a couple of years trying to fix this mess. Then, in 2009, the company unexpectedly announced his resignation, and Ray Elliott replaced him in July of that year. Elliott had made a name for himself by keeping investors rich and happy during his time as CEO of the orthopedic device maker Zimmer Holdings. He’d also been on Boston Scientific’s board. Elliott has said that he agreed to take the helm of Boston Scientific to help out “old friend” Pete Nicholas. The compensation didn’t hurt, either: Elliott earned $33.4 million in cash, stock, and options, making him the second-highest-paid CEO in America that year, according to Forbes.

  • craig

    I worked for Sci Med until it was acquired in 1995. I was fired by dumb assed engineers who were given titles called ‘manager’, who were full of themselves, had no knowledge of the functions of a manager (I had an undergrad. in management, five years’ experience prior to Sci Med, plus a degree in electronic technolgy). Firms that are almost entirely engaged in engineering make the mistake of promoting their ‘own kind’ – that is, engineers, who while they are essential in the engineering function, are absolutely CLUELESS when it comes to maximizing human resources. Hubris, group-think, discrimination against people with other world views, prima donnas, all create a culture of fear among those who love their jobs more than being courageous and speaking truth to neanderthals. Hubris, arrogance CAN KILL!!!! This is how faulty devices find their way into victims and ultimately why B.S., Medtronic etc, are doomed to oblivion UNLESS the culture fosters true managers/coaches who are actually interested in the development of talent who have spent years and tons of their money acquiring the skills. How much talent is sent packing by a dumb-assed engineer who can’t even spell or…

  • Ruben

    I’m a former international employee that was fired when I was the responsible to run the business in a country that was one of the largest market opportunities in the world for BSC.
    Fired in retaliation because through the use the Channel that was included at the Code of Ethic made a formal complaint about many operators “BSC is used to call them Managers” that were using “cold sales” to reach quote that allows them to gain bonus.
    Those fictitious sales were later considered to be part of the annual “write off” at company balance-sheet. As an example, I found ($130K) value equipment (IVUS), seated at a distributor since two year without any action from “BSC Managers” no payment – no return, just an Invoice to gain the bonus for “managers” that of course was paid.
    I made a claim for retaliation at Boston court, that was rejected because the The Sarbanes-Oxley doesn’t protect a citizen of a foreign country. While it was created to protect the investors from any risk, that in a global company can come from international business also. The last CEO “improves” his salary from 600K to 32.4M per year using the same strategy of “bonus…

  • sandy

    confused and saddened that in a time of economic hardship state-wide, and nationally… a local magazine would choose to disparage a locally headquartered company that employs thousands in this state.

  • chris

    I worked at NSC for 2 years in clinical sciences. The place was toxic and leadership was non existent. What goes around comes around. Mr manager was a moron, she is highlr paid, no degree, no morals, and was inappropriate as she bullied any one she wanted to and leadership let her get away with it, no balls to confront her. The ship has sunk.

  • BH

    The article was a clear demonstration of cowardice on the part of the author and the “unnamed analyst”. It’s easy to post negative comments if there is no accountability. In addition, the unprofessionalism demonstrated in publishing unnameed vulgar assessments is inexcusable. Would expect more objective (at least more balanced) “reporting” from a local magazine in writing about a local company that develops life saving medical devices that reduce healthcare costs and help physicians treat patients needs.

  • Martin

    This women signing this article is obviously a crazy feminist writing this coments like;
    “Fed by hubris, testosterone, ego, and greed”.
    Former executives describe what ensued as an all-out testosterone fest.
    Its showing us that testosterone *(men hormon) is responsible for all problems here… Now we should just say that this lady wrote this article estrogenicly stupid and unbalanced and unsure??? Its simple discriminating men and blame them for all here ;p

  • Joel

    This company gets whatever it deserves and folks in the comment section defending them are simply pathetic. I worked for them as a manager for several years and their just the typical old school, east coast good ole boys squeezing every ounce of blood out of their workers and then throwing them away to stay profitable.